Review of methodologies for setting wholesale water tariffs (2014)

Nic led a project for a UK water company to review draft methodologies that the company had developed for calculating wholesale tariffs for water and wastewater services. Wholesale tariffs will become more important following legislative and regulatory reforms to promote retail competition in the water industry.

The focus of our review was on the risks of competition law infringement, including risks of an unlawful margin squeeze and exploitative excessive charging, and whether wholesale tariffs could be justified as reasonable by reference to the company's costs. The review included a step-by-step assessment of the company's draft methodologies, as implemented through its cost allocation processes and Microsoft Excel spreadsheets that provided "cost models" for the company's activities.